Thursday, January 10, 2013

Your Mortgage Interest Deduction is up for grabs in the New Fiscal Cliff debate.

Democrats, led by President Barack Obama, want lawmakers to consider a fresh set of tax increases in the next several weeks when they discuss whether to cut spending.

Republicans oppose raising tax rates, especially after they just raised some of them for the first time in two decades in the New Year’s deal that extended most – but not all – of the expiring Bush tax cuts. 

But much of what Obama is talking about is raising tax revenue without actually raising tax rates. In Washington-speak, lawmakers will try to collect more tax money by closing tax loopholes, perhaps limiting popular tax deductions and to some degree changing the way citizens pay into the popular Medicare and Social Security programs.

One Democrat idea would be to limit how much mortgage interest, state taxes or charitable giving can be deducted from taxes by high-income earners. The New Year’s deal started phasing out some of the tax exemptions claimed by high-income earners and limiting their tax deductions. This could gain in popularity because tax rates remain unchanged and middle-income Americans would not be affected. 

A bipartisan presidential commission in 2010 favored scaling back mortgage-interest deductions, in part because they effectively subsidize the wealthy by offering them a bigger discount off a higher tax rate. The problem is that rolling this program back is fraught with risk in today’s impaired housing market.

Read More: McClatchy

Read more here:

Read more here: